Theory question 104
Purchase and Sale of GoodsCommerce 2 (essay)
Differentiate between the following paired terms:
(a) Trade discount and cash discount;
(b) Branding and packaging;
(c) Indemnity and compensation;
(d) Cash receipt and invoice;
(e) Credit sales and hire purchase.
Show the model answer
(a) Trade discount is a reduction off the list price given to traders to enable them to make profit; cash discount is a reduction given for prompt payment.
(b) Branding gives a product a distinctive name or mark to identify it; packaging wraps it to protect it and make it attractive.
(c) Indemnity restores the insured to his position before an insured loss (property insurance); compensation is an agreed sum paid where loss cannot be measured in money (life, personal accident).
(d) A cash receipt acknowledges money received for goods; an invoice is a bill from the seller stating goods supplied and the amount owed.
(e) In a credit sale ownership passes to the buyer at once and goods cannot be repossessed; in hire purchase ownership passes only after the last instalment and goods can be repossessed.
Give one clear contrast for each pair.